Joker Ltd manufactures two products, Normal and Plus. It has recently implemented an activity-based costing system for its manufacturing overhead costs, with the budgeted activity cost and budgeted quantity of activity driver as follows: Activity Budgeted Activity Cost Activity Driver Budgeted Quantity of Activity Driver Labour-related 205,000 Direct labour hours 41,000 Machine setups 227,000 Number of setups 5,000 General factory 340,000 Machine hours 34,000 772,000 The breakdown of the expected consumption of activities by the two products is as follows: Normal Plus Labour-related 25,000 16,000 Machine setups 2,000 3,000 General factory 20,000 14,000 For the next accounting period, the expected production volume of Normal is 4,500 units and Plus is 3,000 units. Required: Calculate the overhead cost per unit of a Plus.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Joker Ltd manufactures two products, Normal and Plus. It has recently implemented an activity-based costing system for its
| Activity | Budgeted Activity Cost | Activity Driver | Budgeted Quantity of Activity Driver |
| Labour-related | 205,000 | Direct labour hours | 41,000 |
| Machine setups | 227,000 | Number of setups | 5,000 |
| General factory | 340,000 | Machine hours | 34,000 |
| 772,000 |
The breakdown of the expected consumption of activities by the two products is as follows:
| Normal | Plus | |
| Labour-related | 25,000 | 16,000 |
| Machine setups | 2,000 | 3,000 |
| General factory | 20,000 | 14,000 |
For the next accounting period, the expected production volume of Normal is 4,500 units and Plus is 3,000 units.
Required:
Calculate the overhead cost per unit of a Plus.
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